The Company Without Flaws: Eicher Motors (NSE EICHERMOT)

Key takeaways:
-Eicher Motors share is included in Nifty 50 index. Nifty 50 stock list pdf is available here.
-The company is a member of Most Profitable Mega-cap and Large-cap Companies in India stock collection by Eyestock.
-EICHERMOT stock is a viable investment by quantitative analysis made by our analysts.

Eicher Motors share price is up 41% for the last 12 months. What was the reason for it and does it have an upside for a future?

What is Eicher Motors about?

Eicher Motors is an Indian manufacturer of trucks, buses and agricultural machinery. But first, it is the global leader in the middleweight motorcycle industry. The company sells approximately 7 thousand commercial vehicles and more than 70 thousand motorcycles per month according to the monthly sales volume available on the website. Eicher is a parent company of Royal Enfield that has made motorcycles since 1901. If we talk about the production of commercial vehicles, the company is a strategic partner of the Swedish giant Volvo. By the way, we analyzed the financial statements of the Swedes, although they were part of ordinary cars, not trucks. If you are interested in finding out how the industry lives, you can read Investments in Volvo Stocks Insight.

Financial overview of the company

After all, we are talking more about finances than about cars and motorcycles, so it’s time to move on to the numbers from the reports. Annual revenue (for the last 12 months from March 2023) is 165.35 billion INR or approximately $2 billion. So it is quite a large business as a company itself: the market cap of Eicher Motors Ltd is $15 billion.

But more important is how much the company has left after expenses. The cost of goods sold is slightly more than half of the revenue; another 22% goes to operating and other expenses. In other words, the gross margin for the 12 months ending in March 2024 is 46%, and the net profit margin is 24%. These are outstanding indicators for such a business.

In order not to be unfounded, let’s compare this pair of indicators with such companies as iconic Harley-Davidson Inc (NYSE HOG Stock) and no less legendary Piaggio (MIL PIA stock) — the manufacturer of Vespa.

Harley-Davidson Inc
Gross Margin 36%
Net Margin 11%

Piaggio & C
Gross Margin 38%
Net Margin 5%

Back to Eicher Motors. Adding close to the benchmark earnings quality level of 93% which measures the ability to confirm the profit accrued in the financial statements by actually receiving cash on the company accounts we get the perfect picture of the financial performance.

Completing the rating

Analyzing the financial performance is not enough to understand if the company`s stock is a viable investment or not. We add financial position (balance quality), efficiency rate (ROE and ROIC) and sustainability level to complete the quantitative Eyestock Rating which is designed for unbiased and transparent company assessment. Eicher Motors is a fully balanced business with strong financials across all of these areas. With a total of 105 points, the rating exceeded the trigger mark of one hundred for us to call the company outstanding. All that remains is to figure out the price and growth potential.

Eicher Motors relative valuation

The fair value (median P/E meaning product to EPS for the last 12 months) of one stock is 4948 INR according to the relative historical method based on PE ratio. It means that the stock now is undervalued by 5% compared to it but has a huge upside to the maximum historical level of multiplier. Have a look at the chart below and pay attention to the red line — this is the target for such a strong share. But please note: it is a quantitative method, not a fundamental one.

Buying stocks on the yellow line and holding them to the red one is the Eyestock strategy. If you feel comfortable with quants methods of analyzing the financials and price share, join the community of investors using Eyestock`s tools to improve their investments.